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TMI Blog2017 (3) TMI 1229X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is in appeal before the Tribunal against order of the ld.AO dated 22.1.2015 passed under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 for Asstt.Year 2010-11. The assessee has taken following grounds of appeal: Ground No.1 The ld.AO erred on facts and law by txing the notional forex fluctuation gain on restatement of external commericla borrowing (ECB) taken and utilized for capital expenditure. In doing so, the ld.AO failed to appreciate the fact that such gain is in the nature of capital and not in the nature of revenue and the Hon ble Dispute Resolution Panel, Ahmedabad failed to adjudicate on the nature of such gain. Ground no.2 The ld.AO failed to adhere to the directions issued by the Hon ble D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rified that losses of any unit are required to be set off against profits of STP/EOU/SEZ unit (eligible unit) before deduction under section 10A/10B of the Income Tax Act is allowed. Thus, the AO was of the opinion that assessee s entire income from business has to be set off by the brought forward unabsorbed business loss/depreciation, and if something remain, then the assessee will be entitled for exemption under section 10B. The ld.AO thereafter made reference to the decision of the Hon ble Karnataka High Court in the case of Himatasingike Seide Ltd. Vs. CIT, 56 taxmann 151 wherein Hon ble Karnataka High Court has approved this interpretation of the department. He also observed that SLP against this judgment was rejected by the Hon ble S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Hon ble Karnataka High Court in the case of CIT Vs. Yokogawa India Ltd.(supra) has considered an identical situation. Question considered by the Hon ble Karnataka High Court was (ii) Whether the Tribunal was correct in holding that the deduction under section 10A or 10B of the Act during the current assessment year has to be allowed without setting off brought forward unabsorbed losses and the depreciation from earlier assessment year or current assessment year either in the case of non-STP units or in the case of the very same undertaking ? This question was answered in favour of the assessee. 7. The conclusions drawn by the Hon ble High Court are worth to note, which reads as under: .. After making all such computati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apply even in the case where an assessee has opted out of Section 10-A by exercising his option under sub-Section (8). As discussed, it is permissible for an assessee to opt in arid opt out of Section 10-A. In the year when the assessee has opted out, the normal provisions of the Act would apply. The profits derived by him from the STP undertaking would suffer tax in the normal course subject to various provisions of the Act including those of Chapter VI-A. If in such a year, the assessee has suffered losses, such losses would be subject to inter source and inter head set off. The balance if any thereafter can be carried forward for being set off against profits of the subsequent assessment years in the normal course, Unabsorbed depreciati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of the assessees and against the Revenue. 8. Dispute travelled upto the Hon ble Supreme Court, and the Hon ble Supreme Court has formulated the following question: 3. The broad question indicated above may be conveniently dissected into the following specific questions arising in the cases under consideration. (i) Whether Section 10A of the Act is beyond the purview of the computation mechanism of total income as defined under the Act. Consequently, is the income of a Section 10A unit required to be excluded before arriving at the gross total income of the assessee? (ii) Whether the phrase total income in Section 10A of the Act is akin and pari materia with the said expression as appearing in Section 2(45 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcular No. 794 dated 9.8.2000 which states in paragraph 15.6 that, The export turnover and the total turnover for the purposes of sections 10A and 10B shall be of the undertaking located in specified zones or 100% Export Oriented Undertakings, as the case may be, and this shall not have any material relationship with the other business of the assessee outside these zones or units for the purposes of this provision. 17. If the specific provisions of the Act provide [first proviso to Sections 10A(1); 10A (1A) and 10A (4)] that the unit that is contemplated for grant of benefit of deduction is the eligible undertaking and that is also how the contemporaneous Circular of the department (No.794 dated 09.08.2000) understood the situ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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